Open Letter to Ben Bernanke
September 22, 2011
Dear Ben,
The market is down 400+ points today on September 22, 2011 and it’s not even the end of lunch yet. The message is clear. The market is pricing assets as if we were entering the great depression.
1929
Market Crashes in October
New President Sworn in
Unemployment Relief formed
Simulus program launched
UK Ends gold standard, prints money
Federal Reserve Buys Troubled Assets
Revenue Act of 1932
2008
Market Crashes in October
New President Sworn In
Unemployment Relief Extended
Stimulus program launched
US announces QE, prints money
Federal Reserve Buys Troubled Assets
Revenue Jobs Act of 2011
Considering how closely we mirrored the 1929 start of the great depression, it’s not only accurate going backwards, but it appears to be accurate going forward as well.
The great depression had 2 major downturns, one in 1929 and another one in 1937 . It appears that this one will also have 2 major downturns, one in 2008 and another in 2011 with corresponding unemployment to reach a critical level on or about 2012.
Current Unemployment in the United States is 16.2% based on the U-6 measurement (this is the closest we have to the way they measured unemployment in the 1930′s)
The Unemployment rate in 1932 was 16.2% as well, from that point it took a turn to the worse and hit a mind boggling 25%
The US at the time had a fraction of the population it does now, this would translate to roughly 38.4 million Americans out of work from the current 24.5 million that are officially reported from the U-6 measurement should the unemployment levels reach that point
Levels of unemployment in that range are what is viewed as worst case, and increasing likely based on current economic output from Europe, the US and China.
In other words, the market doesn’t like the policies coming from the Federal Reserve and are pricing in a depression, not a recession.
If your helicopter is going to fly overhead, it needs to stop flying over banks. It needs to fly over Main Street and let the banks compete for deposits, the other valid option is to do nothing and let the American (and world) population take it’s medicine.
We want to stress however that prior the medicine prescribed in the 1930′s was called World War II.
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Gladys
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